Correlation Between Emmi AG and Forbo Holding
Can any of the company-specific risk be diversified away by investing in both Emmi AG and Forbo Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Emmi AG and Forbo Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emmi AG and Forbo Holding AG, you can compare the effects of market volatilities on Emmi AG and Forbo Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Emmi AG with a short position of Forbo Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emmi AG and Forbo Holding.
Diversification Opportunities for Emmi AG and Forbo Holding
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emmi and Forbo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Emmi AG and Forbo Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forbo Holding AG and Emmi AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Emmi AG are associated (or correlated) with Forbo Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forbo Holding AG has no effect on the direction of Emmi AG i.e., Emmi AG and Forbo Holding go up and down completely randomly.
Pair Corralation between Emmi AG and Forbo Holding
Assuming the 90 days trading horizon Emmi AG is expected to generate 1.02 times more return on investment than Forbo Holding. However, Emmi AG is 1.02 times more volatile than Forbo Holding AG. It trades about -0.3 of its potential returns per unit of risk. Forbo Holding AG is currently generating about -0.31 per unit of risk. If you would invest 82,300 in Emmi AG on September 4, 2024 and sell it today you would lose (6,000) from holding Emmi AG or give up 7.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emmi AG vs. Forbo Holding AG
Performance |
| Timeline |
| Emmi AG |
| Forbo Holding AG |
Emmi AG and Forbo Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emmi AG and Forbo Holding
The main advantage of trading using opposite Emmi AG and Forbo Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emmi AG position performs unexpectedly, Forbo Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Forbo Holding will offset losses from the drop in Forbo Holding's long position.| Emmi AG vs. Bucher Industries AG | Emmi AG vs. EMS CHEMIE HOLDING AG | Emmi AG vs. Barry Callebaut AG | Emmi AG vs. Geberit AG |
| Forbo Holding vs. Bucher Industries AG | Forbo Holding vs. Interroll Holding AG | Forbo Holding vs. Emmi AG | Forbo Holding vs. Belimo Holding |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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